Texas Business Organizations Code 21.563 – Closely Held Corporation
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(a) In this section, “closely held corporation” means a corporation that has:
(1) fewer than 35 shareholders; and
(2) no shares listed on a national securities exchange or regularly quoted in an over-the-counter market by one or more members of a national securities association.
(b) Sections 21.552-21.560 do not apply to a claim or a derivative proceeding by a shareholder of a closely held corporation against a director, officer, or shareholder of the corporation. In the event the claim or derivative proceeding is also made against a person who is not that director, officer, or shareholder, this subsection applies only to the claim or derivative proceeding against the director, officer, or shareholder.
Terms Used In Texas Business Organizations Code 21.563
- Association: means an entity governed as an association under Title 6 or 7. See Texas Business Organizations Code 1.002
- Corporation: A legal entity owned by the holders of shares of stock that have been issued, and that can own, receive, and transfer property, and carry on business in its own name.
- Corporation: means an entity governed as a corporation under Title 2 or 7. See Texas Business Organizations Code 1.002
- Director: means an individual who serves on the board of directors of a foreign or domestic corporation. See Texas Business Organizations Code 1.002
- Justice: when applied to a magistrate, means justice of the peace. See Texas Government Code 312.011
- Law: means , unless the context requires otherwise, both statutory and common law. See Texas Business Organizations Code 1.002
- National securities exchange: means an exchange registered as a national securities exchange under Section 6, Securities Exchange Act of 1934 (15 U. See Texas Business Organizations Code 1.002
- Officer: means an individual elected, appointed, or designated as an officer of an entity by the entity's governing authority or under the entity's governing documents. See Texas Business Organizations Code 1.002
- Person: means an individual or a corporation, partnership, limited liability company, business trust, trust, association, or other organization, estate, government or governmental subdivision or agency, or other legal entity, or a protected series or registered series of a domestic limited liability company or foreign entity. See Texas Business Organizations Code 1.002
- Plaintiff: The person who files the complaint in a civil lawsuit.
(c) If Sections 21.552-21.560 do not apply because of Subsection (b) and if justice requires:
(1) a derivative proceeding brought by a shareholder of a closely held corporation may be treated by a court as a direct action brought by the shareholder for the shareholder’s own benefit; and
(2) a recovery in a direct or derivative proceeding by a shareholder may be paid directly to the plaintiff or to the corporation if necessary to protect the interests of creditors or other shareholders of the corporation.
(d) Other provisions of state law govern whether a shareholder has a direct cause of action or right to sue a director, officer, or shareholder, and this section may not be construed to create that direct cause of action or right to sue.